Why Does the Cyclical Behavior of Real Wages Change Over Time?

Kevin Huang (), Zheng Liu and Louis Phaneuf

American Economic Review, 2004, vol. 94, issue 4, 836-856

Abstract: The cyclical behavior of real wages has evolved from mildly countercyclical during the interwar period to modestly procyclical in the postwar era. This paper presents a general-equilibrium business-cycle model that helps explain the evolution. In the model, changes in the real wage cyclicality arise from interactions between nominal wage and price rigidities and an evolving input-output structure.

Date: 2004
Note: DOI: 10.1257/0002828042002552
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